Deal Gone Wrong! Help - Posted by DavidJ

Real Estate Investing
1

Posted by David Butler on April 15, 2007 at 20:16:20:

Hello David,

Mike, Anne, and Jason both have asked some good questions here that can go a long way in possibly finding a solution to your present dilemma. Best bet now may be to give precise information:

You stated that the property is in Riverside County, California. That’s a huge County, with many smaller demographic areas to consider?! Where precisely? Do you have current market research for that area?

Also, ou also stated that the property has good equity in it. What is the estimated FMV today? You mentioned you listed the property - did you interview at least three RE agencies? Regardless, did you obtain CMA’s (Comparative Market Analyses) from whatever real estate companies you did interview? Did you set the price, or did they? Does that price indicate a reasonable basis for FMV compared to comparable sales provided in the CMA’s you received?

What is owed as an outstanding principal balance on the existing 1st lien loan you took title to the propert “subject to”…?

What type of a loan is it? Fixed, ARM, What is the interest rate, monthly P & I payment, PiTi Payment? etc.

Is this loan current at this time?

Have you done sufficient research to determine the street rent for the property?

Do you have any clear ideas as to Why you have been unable to sell?

You also mention that “We have considered renting, L/O and Wraps however we have been unsuccessful.” Why were you unsuccessful, specifically, with regard to…

renting?
L/O?
Wrapping?

“Renting this property will give us negative cashflow.” Okay… what kind of cash flow did you get by NOT renting the property? Why won’t a L/O or wrap be done to work around that?

“We were unable to sell the property on a wrap!” Why were you unable to sell the property on a wrap?

Why did the property appraise for $630,000 but you are unable to do anything with it? Did you ever receive any kind of offers, and if so, why didn’t they fly?

None of us has a completely clear picture of what’s gone on, and why - other than it appears you may have overpaid for the property. But you should have some handle on things. If for no other reason than frustration. The missing answers to all of the above questions will allow for solutions… if solutions can be found. So what are the answers?!

Then hopefully we here can find a solution that will meet your needs. And best wishes for your success!

David P. Butler

2

Deal Gone Wrong! Help - Posted by DavidJ

Posted by DavidJ on April 13, 2007 at 16:02:21:

I purchased a property by taking over title subject to existing financing. At the time of purchase the property had Good equity.

1 year has passed by and I have still been unable to sell. What consequences do I personally face for letting the home go to foreclosure. (I took title in the home through an S corp)

The loan is in the original owners name!

3

2 issues… - Posted by Jason (AL)

Posted by Jason (AL) on April 14, 2007 at 21:02:31:

The underlying cause of you not being able to move this
property could be the result of 2 things:

  1. it’s over priced/asking too much down/payments are too high

OR

  1. you’re not marketing this thing effectively

Could be a combination of both.

What have you tried -SPECIFICALLY- to move this property?

If you took title sub2, you have a moral obligation to your sellers.

You say it had “good equity” initially.
If this is the case, what’s preventing you from refinancing in YOUR name?
This would at least give you a little breathing room, as well as getting your sellers “off the hook”.
Who knows, you may be able to get a better rate w/the refi, thus allowing you more favorable monthly payments.
Lower payments for you = lower payments for YOUR buyers.
This small factor may be enough to entice someone to purchase from you.

Good luck with this one…

4

Subject to loan gone wild… - Posted by Michael Morrongiello

Posted by Michael Morrongiello on April 14, 2007 at 19:12:51:

DavidJ:
Perhaps providing more of the specifics might help you and those on this board to “chime in” and see what if any solutions might be feasible.

You stated that the property is in California - WHERE exactly in the “Golden State”?

You also stated that the property has good equity in it?

What is the estimated FMV today?

What is owed as an outstanding principal balance on the existing 1st lien loan you took title to the propert “subject to”…?

What type of a loan is it? Fixed, ARM, What is the interest rate, monthly P & I payment, PiTi Payment? etc.

Is this loan current at this time?

Have you let the home sit vacant for the whole year?

The folks you took title from I am sure will not be pleased if you allow this loan to default and a foreclosure results. Taking title “subject to” existing financing is a great tool to relieve a distress property seller from their obligations of having to continue to make payments, but also there comes with it moral and ethical considerations for the real estate entrepeneur as well.

Michael Morrongiello

5

Re: Deal Gone Wrong! Help - Posted by Anne_ND

Posted by Anne_ND on April 13, 2007 at 18:21:14:

David,

You should look at your original docs to determine the consequences of walking away from this deal.

I think the right thing to do would be to offer to the people in whose name the property is in, to give it back to them so they can at least salvage their credit (be aware they might say no).

I don’t know what your personal financial consequences would be if you walked, but you would probably take a hit from a good name/personal credibility standpoint. You could also get sued.

Why not approach this from the standpoint that you are going to do the right thing, and let us help you brainstorm about how to salvage the deal (have you tried L/O? straight rental? a wrap? auction?). Where are you located?

You will probably get more responses on the main board, too.

Anne

6

Re: Subject to loan gone wild… - Posted by DavidJ

Posted by DavidJ on April 15, 2007 at 16:05:41:

The property is in Southern California, Riverside County. When I purchased the property it had about $110k of equity. I bought the property for 520k and it was appraised at 630k.

The house was in escrow but fell out due to the owner not qualifying for a loan.

Yes the property has been vacant for almost one year! I had to evict the tenants that were in the home when I bought it and they fought it every step of the way. In addition to the lawsuit, I just have not been able to sell.

I have kept the home for a year vacant because morally and ethically I felt that it was my responsibility to sell it, but I’m starting to have a hard time…

I have dropped the price to 599,500 in anticipation of a quick sell however I have not had any bites yet. I just listed it for that price last week.

Wish me luck on this one!

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Re: Deal Gone Wrong! Help - Posted by DavidJ

Posted by DavidJ on April 13, 2007 at 18:28:45:

We are in California. We have considered renting, L/O and Wraps however we have been unsuccessful. Renting this property will give us negative cashflow. We were unable to sell the property on a wrap!

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Re: Subject to loan gone wild… - Posted by TeddyB_SC

Posted by TeddyB_SC on April 18, 2007 at 08:56:49:

I don’t see how you could consider letting this go to foreclosure. Why wouldn’t you sell it for 520K and get out of the deal.

TeddyB_SC